Suspended Directors Have No Right to Valuation Reports Rejected by COC u/s 24 of IBC: NCLAT [Read Order]

The Principal Bench of the National Company Law Appellate Tribunal (NCLAT), New Delhi, ruled that suspended directors of a corporate debtor cannot demand access to valuation reports rejected by the CoC, as they are not CoC members under Section 24 of the IBC, 2016.

The Appellant, Manish Bagrodia, a suspended director of Winsome Yarns Limited, filed an appeal under Section 61 ofInsolvency and Bankruptcy Code 2016 arising out of the Impugned Order dated 16.05.2025 passed by the Adjudicating Authority (National Company Law Tribunal, Chandigarh Bench-I) in I.A. No. 1935 of 2024 in C.P. (IB) 291 (CHD) of 2018.

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The Appellant appealed to the National Company Law Appellate Tribunal (NCLAT) after the National Company Law Tribunal (NCLT) dismissed his application and sought access to the initial two valuation reports for the company, which the Committee of Creditors (CoC) had rejected as "high-pitched" and decided to obtain fresh valuations.

The Section 61 of Insolvency and Bankruptcy Code 2016, explained that: Appeals and Appellate Authority.

“(1) Notwithstanding anything to the contrary contained under the Companies Act 2013, any person aggrieved by the order of the Adjudicating Authority under this part may prefer an appeal to the National Company Law Appellate Tribunal.

(2) Every appeal under sub-section (1) shall be filed within thirty days before the National Company Law Appellate Tribunal:

Provided that the National Company Law Appellate Tribunal may allow an appeal to be filed after the expiry of the said period of thirty days if it is satisfied that there was sufficient cause for not filing the appeal but such period shall not exceed fifteen days.”

The Appellant was admitted into CIRP on 22.12.2023. Two valuers, M/s Gtech Valuers Pvt. Ltd. and M/s Value Edge Professionals Pvt. Ltd., were initially appointed to value the corporate debtor's assets. During the 9th CoC meeting on 06.06.2024, the CoC rejected their valuation reports as high-pitched and appointed fresh valuers—M/s Kanassure Valuation Services Pvt. Ltd. and R&A Valuation LLP.

The Appellant repeatedly requested the Resolution Professional for copies of the rejected valuation reports via emails dated 14.06.2024, 25.06.2024, and 07.07.2024, which were not provided. Thus, the final valuation reports of the new valuers were shared with the appellant on 06.07.2024. The appellant filed IA No. 1935 of 2024 on 28.08.2024 seeking directions for disclosure of the rejected reports. The Adjudicating Authority dismissed the application on 16.05.2025, leading to the present appeal.

The Counsel for the Appellant, Pulkit Deora, argued that as an ex-director, the Appellant had a statutory right to access all documents related to the Corporate Insolvency Resolution Process (CIRP), including the initial valuation reports, citing the Supreme Court's judgment in Vijay Kumar Jain Vs Standard and Chartered Bank in Civil Appeal No. 8430 of 2018. The Counsel further stated that he was unfairly excluded from CoC meetings when these reports were discussed, violating his participative rights under Section 24 of the Insolvency and Bankruptcy Code, 2016 (IBC).

The Section 24 of the Insolvency and Bankruptcy Code, 2016 (IBC) explained that: Meeting of committee of creditors

“(3) The resolution professional shall give notice of each meeting of the committee of creditors to:

(b)members of the suspended Board of Directors or the partners of the corporate persons, as the case may be

(4) The directors, partners and one representative of operational creditors, as referred to in sub-section (3), may attend the meetings of committee of creditors, but shall not have any right to vote in such meetings:

Provided that the absence of any such direct or, partner or representative of operational creditors, as the case may be, shall not invalidate proceedings of such meeting.”

The Counsel for the Respondent- Resolution Professional, Sandeep Bajaj, argued that the initial reports were redundant after the CoC rejected them and obtained new ones. He stated that the final, relevant valuation reports and resolution plans were indeed shared with the appellant. The RP emphasized that valuation reports were confidential, as per Regulation 35(2) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, and were to be shared only with CoC members who provide confidentiality undertakings.

Further, the Counsel relied on the judgment of this Tribunal in Dr. Arabinda Kumar Rath Vs Siba Kumar Mohapatra in CA(AT)(Ins) No. 1482 of 2023, wherein it has been held that the CIRP Regulations do not entail the need to share valuation reports of the Corporate Debtor with the suspended management.

The Tribunal consisted of Chairperson, Justice Ashok Bhushan and Technical Member, Barun Mitra, heard and reviewed the matter.

The Tribunal, after considering the arguments and minutes of the COC meetings, found no deliberate lapse or discrimination by the RP and stated that the initial valuation reports were received on the day of the 9th CoC meeting and thus could not have been circulated with the agenda.

Further, The Tribunal affirmed that the CoC's decision to reject the initial reports and obtain new ones fell within its commercial wisdom, which should not be interfered with. Since the final, relevant valuation reports and resolution plans were provided to the Appellant, the NCLAT concluded that he had no legal right to demand access to reports that were discarded and no longer relevant to the CIRP.

Thus, the NCLAT dismissed the appeal with no order as to costs.

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